Investing in Bitcoin v/s Investing in Gold

A crisis highlights the need for diversification of investments. Both Gold and BTC have their set of pros and cons when it comes to investing!

There is always an ongoing debate on which asset is the best for investments. The discussion is more profound now than ever before. Investing in assets that appreciate is the need of the hour.

The Coronavirus pandemic forced the shutdown of Businesses. Financial markets collapsed during the peak. Like many others before it, this crisis highlighted the importance of one’s investments in good assets. 

 

How did BTC fare during the pandemic

This year has so far been an eventful year for Bitcoin [BTCUSD]. The third Bitcoin halving took place on May 11. Retail investors flocked to buying BTC. The highlight of the year was the institutional investments in BTC.

Source: TradingView.com

The BTCUSD daily chart shows that as per today’s price of $9,630, BTC increased by more than 35% from January 1. The stock markets performed poorly during the same time. As per current levels, the US S&P 500 or SPX index lost approximately 4%.

 

Performance of Gold or XAUUSD during the pandemic

Gold or XAUSD is a natural metal found in the earth’s surface. It is considered as one of the safest assets one could acquire. Gold increased by approximately 12% in value from January 1 till now. It is visible in the daily spot price chart of XAUUSD.

 

Pros and cons of each investment method

Investments in both Gold and BTC have their set of pros and cons. Let us list out the points of Gold first.

Pros of investing in Gold [XAUUSD]:

  • It is a tangible asset found in the earth’s surface. It has commercial usage. Therefore, its price does not depend upon the buyer and seller alone.
  • Volatility is less. Therefore, there is only a small chance of losing the principal amount.

Cons of XAUUSD:

  • It cannot be used as a means of wealth creation as its value does not substantially increase.
  • Gold is not as liquid as Bitcoin.

 

Pros and cons of investing in Bitcoin [BTCUSD]

Pros:

  • BTC can be a wealth creation tool. It increased by 900,000% in the last decade.
  • The influx of institutional investors highlights its potential in the future.

Cons of BTC:

  • It is highly volatile. BTC can put the entire principal amount at risk.
  • With zero commercial usage, Bitcoin’s price depends only on the buyer and the seller.

Considering both the investment options’ pros and cons, it is clear that there is no single appropriate investment option. One must diversify the portfolio and consider both Bitcoin and Gold, alongside stocks and bonds.

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